Use the Following Information for Questions

question 86

Multiple Choice

Use the following information for questions.
Alt Corporation enters into an agreement with Yates Rentals Co.on January 1, 2011 for the purpose of leasing a machine to be used in its manufacturing operations.The following data pertain to the agreement:
(a) The term of the noncancelable lease is 3 years with no renewal option.Payments of $155,213 are due on December 31 of each year.
(b) The fair value of the machine on January 1, 2011, is $400,000.The machine has a remaining economic life of 10 years, with no residual value.The machine reverts to the lessor upon the termination of the lease.
(c) Alt depreciates all machinery it owns on a straight-line basis.
(d) Alt's incremental borrowing rate is 10% per year.Alt does not have knowledge of the 8% implicit rate used by Yates.
-If the present value of the future lease payments is $400,000 at January 1, 2011, what is the amount of the reduction in the lease liability for Alt Corp.in the second full year of the lease if Alt Corp.accounts for the lease as a finance lease? (Rounded to the nearest dollar.)

• A)$115,213
• B)$123,213
• C)$126,734
• D)$133,070

---

Definitions:

Rank Correlation

A statistic that measures the degree of association between two variables using the ranks of their data.

Oral Exam

An examination method where the candidate articulates responses to questions verbally, used to assess comprehension, communication skills, and knowledge.

Written Exam

A formal test conducted by asking questions on paper or digitally to assess a candidate's knowledge or proficiency in a particular subject or skill.

Psychometricians

Scientists who specialize in the theory and technique of psychological measurement, including the development and refinement of tests and measurements of personality, abilities, and attitudes.